An Overview Of Console Esports - Microsoft

Industry Guest Post: Jonathan Pan is an Esports Instructor at the University of California, Irvine. He has over 13 years of experience in management, strategy, or business development roles across companies small and large. After serving as a Product Manager at Riot Games, he co-founded and served as CEO of Ember, an esports team. He has also delivered one of the most viewed TEDx talks on esports. 


In Part 1 we looked at mobile, a framework for analysis and Nintendo's esports strategy and Part 2 focused on Sony's esports efforts. Today will conclude with Microsoft.

 

MICROSOFT

Microsoft’s esports strategy appears to be growing the competitive communities of these first-party games: HaloGears of War, and Forza. Halo esports has been around for a long time and has kick-started the careers of some famous players today. In fact, the most popular streamer today, Ninja, was a former pro Halo player. However, he had some choice words to say about why he started taking a break from competitive Halo last year.

Gears of War appears to be doing better in terms of esports teams/player relations. Last week, they announced sharing 50% of revenues from skin sales to esports teams. Here’s how Complexity team owner Jason Lake responded:

On the input device front, the Xbox Elite controller is a hit. The controller is customizable with various features to help competitive gamers play better such as rear triggers, bumpers with adjustable sensitivity, adjustable sticks and better grips for long play sessions. Also, more button placements allows players to do more actions more comfortably, increasing performance.

On the platform services front, Xbox Arena allows players to create their own tournaments. It remains to be seen if tournament organizers will adopt to use Xbox Arena to create tournaments are continue to use established third-party tournament platforms such as Battlefy and FACEIT. Battlefy powers Nintendo’s Splatoon 2 tournaments as mentioned earlier. FACEIT became “one of the first Tournament Organizer partners for the Xbox Live Tournaments Platform” in 2016.

 

WHICH STRATEGY IS WORKING?

It’s too soon to tell if Sony or Nintendo’s strategies are working, but they are on good footing. The PS4 is the established market leader with 73.6 million units sold as of December 31, 2017. While Microsoft has not announced sales figures for Xbox One, analysts estimate that figure to be around 30 million. Size matters and Sony is well positioned to leverage their large install base once they have a first-party esports game.

In the meantime, positioning itself around the Call of Duty franchise in a time when Activision-Blizzard is making significant investment across all of their esports games, especially on the tournament administration and broadcast front, is a smart move as gamers won’t likely hear the words that plague other console esports efforts — “lack of investment” or “poor production.”

Nintendo is well-positioned to leverage Smash’s vibrant competitive community while continuing to build up the Splatoon 2 competitive community. The main complaint about Nintendo is that they haven’t done enough to support their esports efforts —now we have an opportunity to see what they will do in 2018.

Microsoft is on shakier ground. They clearly recognize what esports can do for its ecosystem and its games, which is why they have made significant investment in full-fledged esports leagues. However, the main hurdle seems to be spotty execution and not going all in when they need to. This is to be expected as many companies underestimate the amount of money it takes to run in-house tournaments with accompany broadcasts or outsourced ones.

Microsoft Keeps Throwing Money At eSports And It's So Smart

MICROSOFT KEEPS THROWING MONEY AT ESPORTS AND IT'S SO SMART

(Photo: Microsoft)

TNL Take: The big headline around eSports currently are prize pools and in the case of the recently announced Gears of War Pro Circuit, it's a cool million.

But the what's the real story behind the new ten-month circuit between MLG, Gfinity and sponsored by Microsoft for the upcoming release of Gears of War 4?

It's an eSports monetization machine for Xbox.

And it’s so smart.

Let's go through why.

 

/01 Amateurs = Game Sales

Almost everyone I speak to that’s trying to get into eSports looks at it from the Professional angle.

And that totally makes sense if you’re new to eSports and even biased by being involved on the traditional Sports side.

But there’s an opportunity on the amateur side—and especially at the Collegiate level as I covered in The Next Level 008 back in April.

The new Gears of War Pro Circuit is open to both Pro Athletes and amateurs - but you need an actual copy of the game to participate.

Here's an estimate of how much Microsoft can make on this alone:

With just a 1% increase in Game Sales due to eSports, it already covers the Prize Pool with leftover for logistics and marketing. Yes, that's revenue and not profit to Microsoft but that's just one of the revenue streams.

 

/02 Tournament Structure

Here’s the next smart move.

In order for Amateurs to qualify, they will need to earn "Gears Pro Points" by competing in MLG's regional ladders on their GameBattles platform.

In these matches, players get Gears Points for playing well which then qualifies them for one of the international events.

There’s another revenue opportunity here but currently the entry fees are Free.

That’s not including any potential ancillary benefit that Activision-MLG get from new users to their platform.

 

/03 Exclusive eSports Maps and DLC

This is something that hasn't been announced and I'm including it to provide a scope on the overall monetization opportunity.

Microsoft could easily sell Gears of War 4 Map packs that are needed for eSports tournaments:

There's another potential million right there.

 

/04 Global and Regional Events

Outside of two dates in Columbus, which would be expected as the MLG Arena is based there, the interesting part is the international events:

 

Dec. 17-18, London, UK

Spring 2017, Mexico City, Mexico

Spring/Summer 2017, Paris, France

And another eSports event in Las Vegas in Summer 2017

 

While there are revenue opportunities via Tickets and Merchandise, events are ultimately a loss leader.

This is a perfect opportunity to use the whole program to not only promote Gears of War but Xbox eSports globally.

 

/05 Player Donated Prize Pools

You’ve probably seen the headlines of DoTA’s The International 6 recently surpassing a $20M total prize pool this past weekend with the winning Chinese team taking home $9M+ themselves.

Here's what no one mentions - but I'm going to more deeply soon - is that 92% of that $20M prize pool came from players themselves.

Valve contributes $1.6M to the prize pool and has remained the same amount the past few years.

It's super easy: Players buy in-game cosmetic items like an outfit or weapon skin for their character which doesn't help their gameplay at all and a part of that goes to the prize pool.

Microsoft will be hosting an October event where players will be able to buy Gears eSports themed in game content with proceeds going towards the tournament.

 

Some of that is going back to Microsoft.

 

/06 Broadcast

Gears of War doesn’t draw big Twitch viewership and I’ve already shown how challenging it can be to get Brands associated with First Person Shooter content, but there should be some minimal revenue from Broadcasts as well. 

 

And there you have it. 

Now let's see if Microsoft does the same for Halo.

Last season of Halo Championship Series was less than $250K in prize money.